Exhibit
10.96


 


SECURITY AGREEMENT


 


SECURITY AGREEMENT dated as
of March 23, 2004 by and between VCAMPUS CORPORATION, a Delaware corporation
(the “Company”), and SHERLEIGH ASSOCIATES, LLC, in its capacity as the collateral agent for
the Secured Parties referred to below (together with its successors in such
capacity, the “Collateral Agent”).


 


RECITALS:


 


A.            Pursuant to the
Purchase Agreement dated as of the date hereof (including all annexes, exhibits
and schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Purchase
Agreement”) among the Company, the purchasers referred to
therein (the “Purchasers”)
and the Collateral Agent, the Company has agreed to issue, and subject to the
terms thereof, the Purchasers have agreed to purchase (a) $2,399,625 aggregate
principal amount of the Company’s 2004 Series A Senior Secured Convertible
Notes due April 1, 2009 (the “Series A Notes”),
and (b) up to $1,250,000 aggregate principal amount of the Company’s 2004
Series B Senior Secured Convertible Notes due April 1, 2009 (the “Series B
Notes”, and together with the Series A Notes, the “Notes”);


 


B.            As a condition to
the Purchasers’ obligation to purchase the Notes, the Purchasers have required
and the Company has agreed to execute and deliver this Security Agreement to
provide collateral security for the obligation of the Company under the Notes,
the Purchase Agreement, this Security Agreement, the Technology Collateral
Escrow Agreement and any other agreements entered into, now or in the future by
the Company in connection with this Security Agreement or the Purchase
Agreement (the “Note Documents”).


 


NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:


 


Section 1.  Defined
Terms.  Terms defined in the Purchase
Agreement and not otherwise defined in this Security Agreement (including Annex
A hereto) are used herein as therein defined. 
All other terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.


 


Section 2.  Grant
Of Lien.  (a)  To secure the prompt and
complete payment, performance and observance when due (whether at stated
maturity, by acceleration or otherwise) of all of its Secured Obligations, the
Company hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to the Collateral Agent, for itself and the benefit of all other
Secured Parties, a security interest in all of its right, title and interest
in, to and under all personal property and other assets, whether now owned by
or owing to, or hereafter acquired by or arising in favor of the Company
(including under any trade names, styles or derivations thereof), and whether
owned or consigned by or to, or leased from or to, the Company, and regardless
of where located (all of which being hereinafter collectively referred to as
the “Collateral”),
including:


 

















 


(i)            all Pledged Stock
(other than for Subsidiaries that have ceased operations and have no material
assets);


 


(ii)           all Accounts;


 


(iii)          all Chattel Paper;


 


(iv)          all Documents;


 


(v)           all General Intangibles
(including payment intangibles and Software);


 


(vi)          all Goods (including
Inventory and Equipment);


 


(vii)         all Instruments;


 


(viii)        all Investment
Property;


 


(ix)           all Deposit
Accounts of the Company, including all deposits therein;


 


(x)            all Intellectual
Property;


 


(xi)           all money, cash or
cash equivalents of the Company;


 


(xii)          all Supporting
Secured Obligations and Letter-of-Credit Rights of the Company;


 


(xiii)         all books and
records pertaining to the Collateral;


 


(xiv)        the Commercial Tort
Claims; and


 


(xv)         to the extent not
otherwise included, all Proceeds, tort claims, insurance claims and other
rights to payments not otherwise included in the foregoing and products of the
foregoing and all accessions to, substitutions and replacements for, and rents
and profits of, each of the foregoing.


 


Notwithstanding
the foregoing, the security interest granted herein does not extend to, and the
term “Collateral” does not include, any license or contract rights to
the extent (i) the granting of a security interest therein would be contrary to
applicable law, or (ii) that such rights are non-assignable by their terms (but
only to the extent such prohibition is enforceable under applicable law without
the consent of the licensor or other party).


 


(b)        In addition, to secure the prompt and complete payment,
performance and observance of the Secured Obligations and in order to induce
the Collateral Agent and Purchasers as aforesaid, the Company hereby grants to
the Collateral Agent, for itself and the benefit of the Purchasers, a right of
setoff against the property of the Company held by the Collateral Agent or any
Purchaser, consisting of property described above in Section 2(a) now or
hereafter in the possession or custody of or in transit to the Collateral Agent
or any Purchaser, for any purpose, including safekeeping, collection or pledge,
for the account of the Company, or as to which the Company may have any right
or power.


 


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Section 3. 
Collateral Agent’s And Purchasers’ Rights: Limitations On The
Collateral Agent’s And Purchasers’ Obligations.  


 


(a)        It is expressly agreed by the Company that, anything herein
to the contrary notwithstanding, the Company shall remain liable under each of
its Contracts and each of its Licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder.  Neither the Collateral Agent nor any other
Secured Party shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by the Collateral Agent or any other
Secured Party of any payment relating to any Contract or License pursuant
hereto.  Neither the Collateral Agent
nor any other Secured Party shall be required or obligated in any manner to
perform or fulfill any of the obligations of the Company under or pursuant to
any Contract or License, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License, or to present or
file any claims, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.


 


(b)        The Collateral Agent may at any time after an Event of
Default (as such term is defined in the Notes) has occurred and be continuing,
without prior notice to the Company, notify Account Debtors and other Persons
obligated on the Collateral that the Collateral Agent has a security interest
therein, and that payments shall be made directly to the Collateral Agent.  At any time after an Event of Default has
occurred and be continuing, upon the request of the Collateral Agent, the
Company shall so notify Account Debtors and other Persons obligated on
Collateral.  Once any such notice has
been given to any Account Debtor or other Person obligated on the Collateral,
the Company shall not give any contrary instructions to such Account Debtor or
other Person without the Collateral Agent’s prior written consent.


 


(c)        The Collateral Agent may at any time in the Collateral
Agent’s own name, in the name of a nominee of the Collateral Agent or in the name
of the Company communicate with Account Debtors, parties to Contracts and
obligors in respect of Instruments to verify with such Persons, to the
Collateral Agent’s satisfaction, the existence, amount and terms of, and any
other matter relating to, Accounts, payment intangibles, Instruments or Chattel
Paper.


 


Section 4.  Representations
And Warranties.  The Company
represents and warrants that:


 


(a)        The Company has rights in and the power to transfer, and is
the sole beneficial owner of, each item of the Collateral upon which it
purports to grant a Lien hereunder free and clear of any and all Liens (other
than Permitted Liens or as set forth on the attached Schedule 4(a)).


 


(b)        No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all
or any part of the Collateral is on file or of record in any public office,
except such as may have been filed by the Company in favor of the Collateral
Agent pursuant to this Security Agreement or the other Note Documents or as set
forth on the attached Schedule 4(b).


 


(c)        This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of appropriate financing statements
with the governmental offices listed on


 


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Schedule I hereto, a perfected Lien in favor of the
Collateral Agent, for itself and the benefit of Purchasers, on the Collateral
with respect to which a Lien may be perfected by filing pursuant to Article 9
of the Code.  As of the Closing, such
Lien will be prior to all other Liens that would be prior to the Liens in favor
of the Collateral Agent as a matter of law (other than Permitted Liens), and is
enforceable as such as against any and all creditors of and purchasers from the
Company (other than purchasers and lessees of Inventory in the ordinary course
of business and non-exclusive licensees of General Intangibles in the ordinary
course of business or as set forth on the attached Schedule 4(c)).


 


(d)        Schedule II hereto lists all Instruments, Letter of
Credit Rights and Chattel Paper of the Company (other than evidence of
indebtedness, if any, of the Company’s Chief Executive Officer to the Company
in the principal amount of approximately $78,000, which instrument is not
listed on Schedule II and with respect to which Collateral Agent is not being
given physical possession).  All action
by the Company necessary or desirable to protect and perfect the Lien of the
Collateral Agent on each item set forth on Schedule II (including the
delivery of all originals thereof to the Collateral Agent and the legending of
all Chattel Paper as required by Section 5(b) hereof) has been duly
taken or will be duly taken promptly after Closing.  The Lien of the Collateral Agent, for the benefit of the
Collateral Agent and Purchasers, on the Collateral listed on Schedule II
hereto is prior to all other Liens that would be prior to the Liens in favor of
the Collateral Agent as a matter of law, and is enforceable as such against any
and all creditors of and purchasers from the Company.


 


(e)        The Company’s name as it appears in official filings in the
state of its incorporation or other organization, the type of entity of the
Company (including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by the
Company’s state of incorporation or organization or a statement that no such
number has been issued, federal employer identification number of the Company,
the Company’s state of organization or incorporation, the location of the
Company’ chief executive office, principal place of business, offices, all
warehouses and premises where Collateral is stored or located, and the
locations of its books and records concerning the Collateral are set forth on Schedule
III hereto.  The Company has only
one state of incorporation or organization. 
The Company has not, during the five years prior to the date of this
Security Agreement, been known by or used any other corporate or fictitious
name or been party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
or assets out of the ordinary course of business, except as set forth on Schedule
III hereto.  The Company has not
(i) within the period of four months prior to the date hereof, changed its
location (as defined in Section 9-307 of the Code), (ii) except as
specified on Schedule III hereto, heretofore changed its name, or
(iii) except as specified on Schedule III hereto, heretofore become
a “new debtor” (as defined in Section 9-102(a)(56) of the Code with respect to
a currently effective security agreement previously entered into by any other
Person.


 


(f)         With respect to the Accounts, (i) they represent bona fide
sales of Inventory or rendering of services to Account Debtors in the ordinary
course of the Company’ business and are not evidenced by a judgment, Instrument
or Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted with respect thereto and the Company has not made any agreement with
any Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability


 


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therefor, or any deduction therefrom except a
discount or allowance allowed by the Company in the ordinary course of its
business for prompt payment; (iii) to the Company’s knowledge, there are no
facts, events or occurrences which in any way impair the validity or
enforceability thereof or could reasonably be expected to reduce the amount
payable thereunder as shown on the Company’s books and records and any invoices
and statements delivered to the Collateral Agent and Purchasers with respect
thereto; (iv) the Company has not received any notice of proceedings or actions
which are threatened or pending against any Account Debtor which might result
in any adverse change in such Account Debtor’s financial condition; and (v) the
Company has no knowledge that any Account Debtor is unable generally to pay its
debts as they become due.  Further with
respect to the Accounts (x) the amounts shown on all invoices and statements
which may be delivered to the Collateral Agent with respect thereto are
actually and absolutely owing to the Company as indicated thereon and are not
in any way contingent; and (y) to the Company’s knowledge, all Account Debtors
have the capacity to contract.


 


(g)        The
Company does not have any interest in, or title to, any Patent, Trademark or
Copyright except as set forth in Schedule IV hereto.  Except pursuant to License Agreements
entered into by the Company in the ordinary course of business, the Company
owns and possesses the right to use, and has done nothing to authorize or
enable any other Person to use, any Copyright, Patent or Trademark listed on Schedule
IV, and all registrations listed on Schedule IV are valid and in
full force and effect; except as may be set forth in Schedule IV, the
Company owns and possesses the right to use all Copyrights, Patents and
Trademarks, to the Company’s knowledge there is no violation by others of any
right of the Company with respect to any Copyright, Patent or Trademark and the
Company is not infringing in any respect upon any Copyright, Patent or
Trademark of any other Person; and no proceedings have been instituted or are
pending against the Company or, to the Company’s knowledge, threatened and no
claim against the Company has been received by the Company, alleging any such
violation, except as may be set forth on Schedule IV.  This Security Agreement is effective to
create a valid and continuing Lien on and, upon filing of appropriate financing
statements with the governmental offices listed on Schedule I hereto and
an applicable Intellectual Property Security Agreement with the United States
Copyright Office or the United States Patent and Trademark Office, as the case
may be, perfected Liens in favor of the Collateral Agent on the Company’s
Patents, Trademarks and Copyrights and such perfected Liens are enforceable as
such as against any and all creditors of and purchasers from the Company.


 


(h)          Schedule V hereto lists a complete and
accurate list of the Company’s direct and indirect Subsidiaries, showing the
jurisdiction of their organization. 
Each of the Company’s Subsidiaries has ceased operations and do not own
any material assets.


 


(i)         All Deposit Accounts of the Company which contained an
average of $50,000 over any 30-day period in the 12-month period preceding
Closing are listed on Schedule VI, including, with respect to each
depository, (i) the name and address of such depository and (ii) the
account numbers of the accounts maintained with such depository.


 


(j)         Schedule VII hereto lists all material Software owned,
developed, invented and/or created by or on behalf of the Company.


 


(k)        The Company does not have any goods, documents of title or
other Collateral in the custody, control or possession of a third party as of
the date hereof, except for goods located in the United States in transit to a
location of the Company permitted herein in the ordinary course of business of
the Company in the possession of the carrier transporting such goods.  In the event that any goods, documents of
title or other Collateral are at any time after the date hereof in the


 


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custody, control or possession of any other
Person or such carriers, the Company shall promptly notify the Collateral Agent
thereof in writing.  Promptly upon the
Collateral Agent’s request, the Company shall deliver to the Collateral Agent a
collateral access agreement, in form and substance satisfactory to the
Collateral Agent, duly authorized, executed and delivered by such person and
the Company.


 


Section 5.  Covenants.  The Company covenants and agrees
with the Collateral Agent, for the benefit of the Secured Parties, that from
and after the date of this Security Agreement and until the Termination Date:


 


(a)        Further Assurances: Pledge of Instruments; Chattel Paper.


 


(i)            At any time and
from time to time (including upon any written request of the Collateral Agent),
at the sole expense of the Company, the Company shall promptly and duly execute
and deliver any and all such further instruments and documents and take such
further actions reasonably requested by the Collateral Agent as may be
necessary to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (A) using all reasonable
efforts to secure all consents and approvals necessary or appropriate for the
assignment to or for the benefit of the Collateral Agent of any License or
Contract held by the Company; (B) using all reasonable efforts to secure all
consents and approvals necessary or appropriate to enforce the security
interests granted hereunder; and (C) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Security Document as to those jurisdictions that are not Uniform
Commercial Code jurisdictions.


 


(ii)           The
Company hereby irrevocably and unconditionally authorizes the Collateral Agent
at any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Collateral (i) as all assets of the Company or
words of similar effect, regardless of whether any particular asset comprised
in the Collateral falls within the scope of Article 9 of the Code or such jurisdiction,
or (ii) as being of an equal or lesser scope or with greater detail, and (b)
contain any other information required by part 5 of Article 9 of the Code for
the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Company is an organization, the type of
organization and any organization identification number issued to the Company,
and (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  The Company agrees to furnish any such
information to the Collateral Agent promptly upon request.  The Company also ratifies its authorization
for the Collateral Agent to have filed in any Uniform Commercial Code
jurisdiction any initial financing statements or amendments thereto if filed
prior to the date hereof and ratifies and confirms the authorization of the
Collateral Agent to file such financing statements (and amendments, if
any).  The Company hereby authorizes the
Collateral Agent to adopt on behalf of the Company any symbol required for
authenticating any electronic filing. 
In the event that the description of the collateral in any financing statement
naming the Collateral Agent or its designee as the secured party and the
Company as debtor includes assets and properties of the Company that do not at
any time


 


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constitute
Collateral, whether hereunder, under any of the other Note Documents or
otherwise, the filing of such financing statement shall nonetheless be deemed
authorized by the Company to the extent of the Collateral included in such
description and it shall not render the financing statement ineffective as to
any of the Collateral or otherwise affect the financing statement as it applies
to any of the Collateral.  In no event
shall the Company at any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming the Collateral Agent or
its designee as secured party and the Company as debtor.


 


(iii)          The
Company shall, upon the occurrence and during the continuance of any Event of
Default, upon request of the Collateral Agent, promptly notify (and the Company
hereby authorizes the Collateral Agent so to notify) each Account Debtor in
respect of any Accounts, Chattel Paper, Instruments of General Intangibles of
the Company that such Collateral has been assigned to the Collateral Agent
hereunder, and that any payments due or to become due in respect thereof are to
be made directly to the Collateral Agent.


 


(b)        Maintenance of Records.  The Company shall keep and maintain, at its own cost and expense,
satisfactory and complete records of the Collateral, including a record of any
and all payments received and any and all credits granted with respect to the
Collateral in the same manner such records are presently kept and maintained.  If the Company retains possession of any
Chattel Paper or Instruments with the Collateral Agent’s consent, such Chattel
Paper and Instruments shall be marked with a legend the form, scope and
substance of which is acceptable to the Collateral Agent.


 


(c)        Covenants Regarding Patent, Trademark and Copyright
Collateral.


 


(i)            The Company shall notify the Collateral Agent
immediately if it knows or has reason to know that any application or
registration relating to any Patent, Trademark or Copyright (now or hereafter
existing) may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark
Office, the United States Copyright Office or any court) regarding the
Company’s ownership of any Patent, Trademark or Copyright, its right to
register the same, or to keep and maintain the same.


 


(ii)           In no event shall the Company, either itself or through any agent, employee,
licensee or designee, file an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency without giving
the Collateral Agent prior written notice thereof, and, upon request of the
Collateral Agent, the Company shall execute and deliver any and all applicable
Intellectual Property Security Agreements as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s Lien on such Patent,
Trademark or Copyright, and the General Intangibles of the Company relating
thereto or represented thereby.


 


(iii)          The Company shall take all actions necessary or requested by the
Collateral Agent to maintain and pursue each application, to obtain the
relevant registration and


 


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to maintain the registration of each of the
Patents, Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.


 


(d)        Indemnification. 
In any suit, proceeding or action brought by the Collateral Agent or any
Purchaser relating to any Collateral for any sum owing with respect thereto or
to enforce any rights or claims with respect thereto, the Company will save,
indemnify and keep the Collateral Agent and Purchasers harmless from and
against all expense (including reasonable attorneys’ fees and expenses), loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment
or reduction of liability whatsoever of the Account Debtor or other Person
obligated on the Collateral, arising out of a breach by the Company of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from the Company, except in the case of the Collateral Agent or any Purchaser,
to the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of by the Collateral Agent or such Purchaser
as finally determined by a court of competent jurisdiction. All such
obligations of the Company shall be and remain enforceable against and only
against the Company and shall not be enforceable against the Collateral Agent
or any Purchaser.


 


(e)        Compliance with Terms of Accounts, etc.  In
all material respects, the Company will perform and comply with all obligations
in respect of the Collateral and all other agreements to which it is a party or
by which it is bound relating to the Collateral.


 


(f)         Limitation on Liens on Collateral. 
Except for Permitted Liens, the Company will not create, permit or
suffer to exist, and the Company will defend the Collateral against, and take
such other action as is necessary to remove, any Lien on the Collateral, and
will defend the right, title and interest of the Collateral Agent and
Purchasers in and to any of the Company’s rights under the Collateral against
the claims and demands of all Persons whomsoever.


 


(g)        Limitations on Disposition.  Except for actions consistent
with past practice or otherwise taken in the ordinary course of business, the
Company will not sell, license, lease, transfer or otherwise dispose of any of
the Collateral, or attempt or contract to do so, without the prior consent of
the Required Holders.


 


(h)         Further Identification of Collateral.  The Company will, if so
requested by the Collateral Agent, furnish to the Collateral Agent, as often as
the Collateral Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in such
detail as the Collateral Agent may reasonably specify.


 


(i)         Notices.  The Company will advise the
Collateral Agent promptly, in reasonable detail, (i) of any Lien (other than
Permitted Liens) or written claim made or asserted against any of the
Collateral, and (ii) of the occurrence of any other event which could have a
material adverse effect on the aggregate value of the Collateral or on the
Liens created hereunder or under any other Security Document.


 


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(j)         No Reincorporation; No Name Change.  The
Company shall not reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the date hereof without the prior written consent of the
Collateral Agent, which consent shall not be unreasonably withheld.  The Company shall not change its legal name
without first giving 30 days prior written notice of its intent to do so to the
Collateral Agent.


 


(k)        Terminations; Amendments Not Authorized.  The Company acknowledges that it is not
authorized to file any financing statement or amendment or termination
statement with respect to any financing statement without the prior written
consent of the Collateral Agent and agrees that it will not do so without the
prior written consent of the Collateral Agent, subject to the Company’s rights
under Section 9-509(d)(2) of the Code.


 


(l)         Maintenance of Insurance.  The Company shall maintain in force one or
more policies of insurance on all Collateral against risks of fire (with
customary extended coverage), sprinkler leakage, theft, loss or damage and
other risks as the Collateral Agent may reasonably require and in any event,
whether or not Collateral Agent shall so require, against such other risks customarily
insured against by companies engaged in businesses similar to that of the
Company in such amounts containing such terms, in such form, for such periods,
covering such hazards and written by such financially sound companies selected
by the Company and as may be reasonably satisfactory to the Collateral Agent
(it being understood that the Collateral Agent shall not by such approval or
disapproval be liable to the Company or any other person in connection with the
financial condition of such insurer), such insurance to be payable to the
Collateral Agent as its interest may appear in the event of loss; if requested
by the Collateral Agent the policies for the same shall be deposited with the
Collateral Agent; no loss shall be adjusted thereunder without the Collateral
Agent’s approval which approval will not be unreasonably withheld; and promptly
following the Closing the Company shall cause all such policies to provide that
they may not be modified or canceled without first giving at least thirty (30) days
written notice of such modification or cancellation to the Collateral
Agent.  In the event that the Company
fails to provide evidence of the maintenance of such insurance satisfactory to
the Collateral Agent, the Collateral Agent may, at its option, secure such
insurance and charge the cost thereof to the Company (as a Secured Obligation).
The Company shall also maintain casualty insurance coverage and other insurance
coverage on its properties and business including the Collateral naming the
Collateral Agent as loss payee with an endorsement reasonably satisfactory to
the Collateral Agent, which endorsement shall be issued promptly following the
Closing, in amounts and types and with provisions as are usually carried by
others engaged in similar businesses and in all events as may be reasonably
satisfactory to the Collateral Agent as to amounts, coverage and insurance
carriers.


 


(m)          Technology Collateral Escrow Agreement.  The Company shall enter into the Technology
Collateral Escrow Agreement and shall deliver, upon execution thereof, all
source code, documents, and other material and property required thereunder and
shall make such further deliveries and otherwise fully comply with the terms
and conditions of such agreement.


 


(n)           Collateral Access Agreement.  Within 45 days hereof, the Company shall
undertake best efforts to cause Exodus or its authorized agents to deliver to
the Collateral Agent a collateral access agreement, upon terms reasonably
acceptable to the Collateral Agent,


 


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permitting
the Collateral Agent access to the Company’s assets located at Exodus upon an
Event of Default.


 


Section
6.  Collateral
Agent’s Appointment As Attorney-in-Fact.  On the Closing Date, the Company shall
execute and deliver to the Collateral Agent a power of attorney (the “Power of
Attorney”) substantially in the form attached hereto as Exhibit
A.  The power of attorney granted
pursuant to the Power of Attorney is a power coupled with an interest and shall
be irrevocable until the Termination Date. 
The powers conferred on the Collateral Agent, for the benefit of the
Collateral Agent and the Purchasers, under the Power of Attorney are solely to
protect the Collateral Agent’s interests (for the benefit of the Collateral
Agent and the Purchasers) in the Collateral and shall not impose any duty upon
the Collateral Agent or any Purchaser to exercise any such powers.  The Collateral Agent agrees that (a) except
for the powers granted in clause (h) of the Power of Attorney, it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) the Collateral Agent
shall promptly account for, and notify the Company of, any moneys received by
the Collateral Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that none of the
Collateral Agent or any Purchaser shall have any duty as to any Collateral, and
the Collateral Agent and the Purchasers shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers.  NONE OF THE COLLATERAL AGENT, THE PURCHASERS
OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO THE COMPANY FOR ANY ACT OR FAILURE TO
ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.


 


Section 7.  Remedies:  Rights Upon Default. 
(a)  In addition to all other rights and
remedies granted to it under this Security Agreement, the Notes, the Purchase
Agreement and under any other instrument or agreement securing, evidencing or
relating to any of the Secured Obligations, if any Event of Default shall have
occurred and be continuing, the Collateral Agent may (or, if so directed by the
Required Holders, shall) exercise all rights and remedies of a secured party
under the Code.  Without limiting the
generality of the foregoing, the Company expressly agrees that in any such
event the Collateral Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Company or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code and other applicable law),
may forthwith enter upon the premises of the Company where any Collateral is
located through self-help, without judicial process, without first obtaining a
final judgment or giving the Company or any other Person notice and opportunity
for a hearing on the Collateral Agent’s claim or action and may collect,
receive, assemble, process, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, lease, license, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at a public or private sale or sales, at any exchange at such prices as it may
deem acceptable, for cash or on credit or for future delivery without
assumption of any credit risk.  The
Collateral Agent or any Purchaser shall have the right upon any such public
sale or sales and, to


 


10

















 


the extent permitted by law, upon any such private sale or sales, to
purchase for the benefit of the Collateral Agent and the Purchasers, the whole
or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption the Company hereby releases.  Such sales may be adjourned and continued
from time to time with or without notice. 
The Collateral Agent shall have the right to conduct such sales on the
Company’s premises or elsewhere and shall have the right to use the Company’s
premises without charge for such time or times as the Collateral Agent deems
necessary or advisable.


 


If any Event of Default
shall have occurred and be continuing, the Company further agrees, at the
Collateral Agent’s request, to assemble the Collateral and make it available to
the Collateral Agent at a place or places designated by the Collateral Agent which
are reasonably convenient to the Collateral Agent and the Company, whether at
the Company’s premises or elsewhere. 
Until the Collateral Agent is able to effect a sale, lease, or other
disposition of Collateral, the Collateral Agent shall have the right to hold or
use Collateral, or any part thereof, to the extent that it deems appropriate
for the purpose of preserving Collateral or its value or for any other purpose
deemed appropriate by the Collateral Agent. 
The Collateral Agent shall have no obligation to the Company to maintain
or preserve the rights of the Company as against third parties with respect to
Collateral while Collateral is in the possession of the Collateral Agent.  The Collateral Agent may, if it so elects,
seek the appointment of a receiver or keeper to take possession of Collateral
and to enforce any of the Collateral Agent’s remedies (for the benefit of the
Collateral Agent and the Purchasers), with respect to such appointment without
prior notice or hearing as to such appointment.  The Collateral Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale to the
Secured Obligations as provided in the Note Documents, and only after so paying
over such net proceeds, and after the payment by the Collateral Agent of any
other amount required by any provision of law, need the Collateral Agent
account for the surplus, if any, to the Company.  To the maximum extent permitted by applicable law, the Company
waives all claims, damages, and demands against the Collateral Agent or any
Purchaser arising out of the repossession, retention or sale of the Collateral
except such as arise solely out of the gross negligence or willful misconduct
of the Collateral Agent or such Purchaser as finally determined by a court of
competent jurisdiction.  The Company
agrees that ten (10) days prior notice by the Collateral Agent of the time and
place of any public sale or of the time after which a private sale may take place
is reasonable notification of such matters. 
The Company shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all Secured
Obligations, including any attorneys’ fees and other expenses incurred by the
Collateral Agent or any Purchaser to collect such deficiency.


 


(b)        Except as otherwise specifically provided herein, the Company
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.


 


(c)        To the extent that applicable law imposes duties on the Collateral
Agent to exercise remedies in a commercially reasonable manner, the Company
acknowledges and agrees that it is not commercially unreasonable for the
Collateral Agent (i) to fail to incur expenses reasonably deemed significant by
the Collateral Agent to prepare Collateral for disposition or otherwise to
complete raw material or work in process into finished goods or other finished
products for disposition, (ii) to fail to obtain third party consents for
access to Collateral to be disposed of, or


 


11

















 


to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) to exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether
or not in the same business as the Company, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Collateral Agent against risks of loss, collection
or disposition of Collateral or to provide to the Collateral Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent
deemed appropriate by the Collateral Agent, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Collateral Agent in the collection or disposition of any of the Collateral.  The Company acknowledges that the purpose of
this Section 7(c) is to provide non-exhaustive indications of what actions or
omissions by the Collateral Agent would not be commercially unreasonable in the
Collateral Agent’s exercise of remedies against the Collateral and that other
actions or omissions by the Collateral Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section
7(c).  Without limitation upon the
foregoing, nothing contained in this Section 7(c) shall be construed to grant
any rights to the Company or to impose any duties on the Collateral Agent that
would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this Section 7(c).


 


(d)        Neither the Collateral Agent nor the Purchasers shall be required to
make any demand upon, or pursue or exhaust any of their rights or remedies
against, the Company, any other obligor, guarantor, pledgor or any other Person
with respect to the payment of the Secured Obligations or to pursue or exhaust
any of their rights or remedies with respect to any Collateral therefor or any
direct or indirect guarantee thereof. 
Neither the Collateral Agent nor the Purchasers shall be required to
marshal the Collateral or any guarantee of the Secured Obligations or to resort
to the Collateral or any such guarantee in any particular order, and all of its
and their rights hereunder or under any other Note Document shall be
cumulative.  To the extent it may
lawfully do so, the Company absolutely and irrevocably waives and relinquishes
the benefit and advantage of, and covenants not to assert against the
Collateral Agent or any Purchaser, any valuation, stay, appraisement,
extension, redemption or similar laws and any and all rights or defenses it may
have as a surety now or hereafter existing which, but for this provision, might
be applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this Security
Agreement, or otherwise.


 


(e)        Without limiting the foregoing, upon the occurrence and during the
continuance of an Event of Default and upon written notice thereof to the
Company, all rights of the Company


 


12

















 


to exercise any voting or consensual powers
with respect to any Equity Interests in which the Company has an interest and
to receive and retain the distributions which it would otherwise be entitled to
receive and retain shall terminate and all such powers and rights to receive
and retain such distributions shall immediately without further action become
vested in the Collateral Agent.


 


Section 8.  Grant Of License To Use
Intellectual Property Collateral.  For
the purpose of enabling the Collateral Agent to exercise rights and remedies
under Section 7 hereof (including, without limiting the terms of Section
7 hereof, in order to take possession of, hold, preserve, process,
assemble, prepare for sale, market for sale, sell or otherwise dispose of Collateral)
at such time as the Collateral Agent shall be lawfully entitled to exercise
such rights and remedies, the Company hereby grants to the Collateral Agent,
for the benefit of the Collateral Agent and the Purchasers, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to the Company) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by the Company, and wherever the same
may be located, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof.


 


Section 9.  Indemnity; Expenses; Limitation On Collateral
Agent’s And Purchasers’ Duty In Respect Of Collateral.  (a)  Assuming the transactions contemplated
hereby are consummated, the Company shall indemnify and hold the Collateral
Agent, the Purchasers, their respective Affiliates, and each of their
directors, officers, agents and employees (collectively, the “Indemnified Persons”) harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, demands, actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable attorneys’ fees and expenses) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Notes and the termination, resignation or replacement of the
Collateral Agent or any assignment by any Purchaser) be imposed on, incurred by
or asserted against any such Indemnified Person in any way relating to or
arising out of or in connection with the execution, delivery, enforcement,
performance or administration of this Security Agreement, the Notes, the Note
Purchase Agreement, the other Note Documents or any other agreement, letter or
instrument delivered in connection with the transactions contemplated hereby or
the consummation of the transactions contemplated hereby or any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened
claim, investigation, litigation or proceeding) and regardless of whether any
Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all
cases, whether or not caused by or arising, in whole or in part, out of the
negligence of any Indemnified Person; provided that such indemnity shall not,
as to any Indemnified Person, be available to the extent that such Indemnified
Liabilities are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnified Person.    In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 9 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by the Company, its
directors, shareholders or creditors or an Indemnified Party or any other
Person, whether or not an Indemnified Person is otherwise a party thereto and
whether or not any of the transactions


 


13

















 


contemplated hereunder or under any of the other Note Documents are
consummated.  All amounts due under this
Section 9 shall be payable within five Business Days after demand therefor.  The agreements in this Section 9 shall
survive the resignation of the Collateral Agent, the assignment by any
Purchaser and the repayment, satisfaction or discharge of all the other Secured
Obligations.  In the event that any
investigation, litigation or proceeding is asserted or threatened in writing or
instituted against any Indemnified Person, or any remedial, removal or response
action which is requested of it or any other Indemnified Person, for which such
Indemnified Person may desire indemnity or defense hereunder, such Indemnified
Person shall notify the Company in writing of such event; provided that failure
to so notify the Company shall not affect the right of any Indemnified Person
to seek indemnification under this Section 9.


 


(b)           The
Company will pay to the Collateral Agent within five Business Days after demand
the amount of any and all reasonable, documented expenses, including, without
limitation, the fees and expenses of its counsel and of any experts and agents,
that the Collateral Agent may incur in connection with (i) the administration
of this Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from or other realization upon, any of the
Collateral of the Company, (iii) the exercise or enforcement of any of the
rights of the Collateral Agent or the Purchasers hereunder, or (iv) the failure
by the Company to perform or observe any of the provisions hereof.


 


(c)           The
Collateral Agent and each Purchaser shall use reasonable care with respect to
the Collateral in its possession or under its control.  Neither the Collateral Agent nor any
Purchaser shall have any other duty as to any Collateral in its possession or
control or in the possession or control of any agent or nominee of the
Collateral Agent or such Purchaser, or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto.


 


Section 10.  Reinstatement.  This Security
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Company for liquidation or
reorganization, should the Company become insolvent or make an assignment for
the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of the Company’s assets, and shall continue
to be effective or be reinstated, as the case may be, if at any time payment
and performance of the Secured Obligations, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Secured Obligations, whether as a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though
such payment or performance had not been made. 
In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.


 


Section 11.  Notices.  Except
as otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give and serve upon any other party any
communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall in the case of the Company, be given in the manner, and
deemed received, as provided for in the Note Purchase Agreement.


 


14

















 


Section 12.  Severability.  Whenever
possible, each provision of this Security Agreement shall be interpreted in a
manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Security Agreement. 
This Security Agreement is to be read, construed and applied together
with the Note Purchase Agreement and the other Note Documents which, taken
together, set forth the complete understanding and agreement of the Collateral
Agent, the Purchasers and the Company with respect to the matters referred to
herein and therein.


 


Section 13.  No Waiver; Cumulative Remedies.  Neither the Collateral Agent nor any
Purchaser shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing, signed by the Collateral Agent and then only to the extent
therein set forth.  A waiver by the
Collateral Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Collateral Agent would
otherwise have had on any future occasion. 
No failure to exercise nor any delay in exercising on the part of the
Collateral Agent or any Purchaser, any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.  The rights and remedies hereunder provided
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law.  None of the terms or provisions of this Security Agreement may be
waived, altered, modified or amended except by an instrument in writing, duly
executed by the Collateral Agent and the Company.


 


Section 14.  Limitation By Law.  All rights, remedies and powers provided in this Security Agreement may
be exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law that
may be controlling and to be limited to the extent necessary so that they shall
not render this Security Agreement invalid, or unenforceable, in whole or in
part, or not entitled to be recorded, registered or filed under the provisions
of any applicable law.


 


Section 15. 
Termination Of This Security Agreement.  Subject to Section 10 hereof, this Security Agreement shall
terminate upon the Termination Date.


 


Section 16.  Successors And Assigns.  This Security
Agreement and all obligations of the Company hereunder shall be binding upon
the successors and assigns of the Company (including any debtor-in-possession
on behalf of the Company) and shall, together with the rights and remedies of
the Collateral Agent, for the benefit of the Collateral Agent and the
Purchasers, hereunder, inure to the benefit of the Collateral Agent and the
Purchasers, all future holders of any instrument evidencing any of the Secured
Obligations and their respective successors and assigns.  No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or
interest therein shall in any manner impair the Lien granted to the Collateral
Agent, for the benefit of the Collateral Agent and the Purchasers, hereunder.  the Company may not assign,


 


15

















 


sell, hypothecate or otherwise transfer any interest in or obligation
under this Security Agreement.


 


Section 17.  Counterparts.  This Security
Agreement may be authenticated in any number of separate counterparts, each of
which shall collectively and separately constitute one agreement.  This Security Agreement may be authenticated
by manual signature, facsimile or, if approved in writing by the Collateral
Agent, electronic means, all of which shall be equally valid.


 


Section 18.  Governing Law.  IN
ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, STATE OF NEW YORK, SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY, THE COLLATERAL AGENT AND THE PURCHASERS PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER NOTE DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER NOTE
DOCUMENTS, PROVIDED, NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED
OR OPERATE TO PRECLUDE THE COLLATERAL AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE COLLATERAL AGENT. 
THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO THE JURISDICTION
OF THE STATE OR FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK,
STATE OF NEW YORK IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE
COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM  NON  CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT.  THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS PROVIDED THEREFOR IN THE NOTE
PURCHASE AGREEMENT, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.


 


Section 19.  Waiver Of Jury Trial.  BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON


 


16

















 


AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, THE
PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED
BY A JUDGE APPLYING SUCH APPLICABLE LAWS. 
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE COLLATERAL AGENT,
THE PURCHASERS, AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT
OR ANY OF THE OTHER NOTE DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO.


 


Section 20.  Expenses.  The
Company agrees to reimburse each of the Collateral Agent and the Purchasers for
all reasonable, documented costs and expenses incurred by them (including,
without limitation, the reasonable, documented fees and expenses of one legal
counsel) in connection with (i) any Event of Default and any enforcement
or collection proceeding resulting therefrom, including, without limitation,
all manner of participation in or other involvement with (w) performance by the
Collateral Agent of any obligations of the Company in respect of the Collateral
that the Company has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Collateral Agent
in respect thereof, by litigation or otherwise, including expenses of
insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 20, and all such costs and expenses shall be
Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 2.


 


Section 21.  Section Titles.  The
Section titles contained in this Security Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement among the parties hereto.


 


Section 22.  No Strict Construction.  The
parties hereto have participated jointly in the negotiation and drafting of
this Security Agreement.  In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.


 


Section 23.  Advice Of Counsel.  Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.


 


Section 24.  Benefit Of Purchasers.  All Liens granted or contemplated hereby
shall be for the benefit of the Collateral Agent, individually, and the
Purchasers, and all proceeds


 


17

















 


or payments realized from Collateral in accordance herewith shall be
applied to the Secured Obligations in the manner determined by the Collateral
Agent in its sole discretion.


 


[Signature Page Follows]


 


18

















 


IN WITNESS
WHEREOF, each of the parties hereto has caused this Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.


 


	
   

  	
  VCampus Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Nat Kannan

  	
   

  
	
   

  	
  Name:  Nat
  Kannan

  
	
   

  	
  Title:  CEO

  
	
   

  	
   

  
	
   

  	
  Sherleigh Associates LLC,
  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Jack Silver

  	
   

  
	
   

  	
  Name: Jack Silver

  
	
   

  	
  Title:

  
							



 

















 


ANNEX A

to

SECURITY AGREEMENT


 


DEFINITIONS


 


Capitalized
terms used in the Security Agreement shall have the following respective
meanings, and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes
of or to the Security Agreement:


 


“Account
Debtor” means any Person who may become obligated to the Company under,
with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).


 


“Accounts”
means all “accounts,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, including (as the context may reasonably
permit) (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, or Instruments), (including any such obligations that may be
characterized as an account or contract right under the Code), (b) all of
the Company’s rights in, to and under all purchase orders or receipts for goods
or services, (c) all of the Company’s rights to any goods represented by
any of the foregoing (including unpaid sellers’ rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods), (d) all rights to payment due to the Company for
property sold, leased, licensed, assigned or otherwise disposed of, for a
policy of insurance issued or to be issued, for a secondary obligation incurred
or to be incurred, for energy provided or to be provided, for the use or hire
of a vessel under a charter or other contract, arising out of the use of a
credit card or charge card, or for services rendered or to be rendered by the
Company or in connection with any other transaction (whether or not yet earned
by performance on the part of the Company), (e) all health care insurance
receivables and (f) all collateral security of any kind, given by any
Account Debtor or any other Person with respect to any of the foregoing.


 


“Bankruptcy
Code” means the provisions of Title 11 of the United States Code, 11
U.S.C. §§ 101 et  seq.


 


“Business
Day” means any day that is not a Saturday, a Sunday or a day on which banks
are required or permitted to be closed in the City of New York.


 


“Charges”
means all federal, state, county, city, municipal, local, foreign or other
governmental taxes, levies, assessments, charges, liens, claims or encumbrances
upon or relating to (a) the Collateral, (b) the Secured Obligations,
(c) the employees, payroll, income or gross receipts of the Company,
(d) the Company’s ownership or use of any properties or other assets, or
(e) any other aspect of the Company’s business.


 


“Chattel
Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by the
Company.


 

















 


“Code”
means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the
extent that the Code is used to define any term herein and such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 of the Code shall govern; provided  further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, the
Lien on any Collateral under the Security Agreement is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.


 


“Collateral”
has the meaning ascribed to it in Section 2(a).


 


“Commercial
Tort Claims” means all “commercial tort claims” as such term is defined in
the Code.


 


“Contracts”
means all “contracts,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, in any event, including all contracts,
undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which the Company may now or hereafter
have any right, title or interest.


 


“Copyright
License” means any and all rights now owned or hereafter acquired by the
Company under any written agreement granting any right to use any Copyright or
Copyright registration.


 


“Copyrights”
means all of the following now owned or hereafter adopted or acquired by the
Company:  (a) all copyrights, all
General Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, (b) all reissues, extensions or renewals thereof, (c)
the right to recover for all past, present and future infringements thereof and
(d) all other rights of any kind whatsoever accruing thereunder as pertaining
thereto.


 


 “Deposit Accounts”  means all “deposit accounts” as such term is
defined in the Code, now or hereafter held in the name of the Company.


 


“Documents”
means all “documents,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, wherever located.


 


“Dollars”
or “$”  means lawful currency of
the United States of America.


 


“Equipment”
means all “equipment,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, wherever located and, in any event,
including all of the Company’s machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer equipment,
including embedded software and peripheral equipment and all engineering,
processing and manufacturing equipment, office machinery,


 

















 


furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor,
all substitutes for any of the foregoing, fuel therefor, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and all
products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.


 


“Equity
Interest” means the interest of (a) a shareholder in a corporation; (b) a
partner (whether general or limited) in a partnership (whether general, limited
or limited liability); (c) a member in a limited liability company; or (d) any
other Person having any other form of equity security or ownership interest.


 


 “General Intangibles” means all
“general intangibles,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, including (as the context may reasonably
permit) all right, title and interest that the Company may now or hereafter
have in or under any Contract, all payment intangibles, customer lists,
Licenses, Copyrights, Trademarks, Patents, and all applications therefor and
reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), choses in action, rights to receive tax refunds and other payments,
rights to receive dividends, distributions, cash, Instruments and other
property in respect of or in exchange for any pledged Investment Property,
rights of indemnification, all books and records, correspondence, credit files,
invoices and other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession or under the
control of the Company or any computer bureau or service company from time to
time acting for the Company.


 


“Goods”
means all “goods” as defined in the Code, now owned or hereafter acquired by
the Company, wherever located, including embedded software to the extent
included in “goods” as defined in the Code.


 


“Instruments”
means all “instruments,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, wherever located, and, in any event,
including all certificates of deposit, and all promissory notes and other
evidences of indebtedness, other than instruments that constitute, or are a
part of a group of writings that constitute, Chattel Paper.


 


“Intellectual
Property” means collectively, all Copyrights, all Patents and all
Trademarks, together with (a) all inventions, processes, production methods,
proprietary information, know-how and trade secrets; (b) all Copyright
Licenses, Patent Licenses and Trademark Licenses; (c) all information,
customer lists, identification of suppliers, data, plans, blueprints,


 

















 


specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held by
the Company; and (g) all causes of action, claims, and warranties now or
hereafter owned or acquired by the Company in respect of any of the items
listed above.


 


“Intellectual
Property Security Agreement” means, with respect to Patents and Trademarks,
the Notice of Security Interest in Patents and Trademarks substantially in the
form of Exhibit I-A attached hereto and shall include any amendments,
restatements, supplements, or other modifications thereto, and with respect to
Copyrights, the Notice of Security Interest in Copyrights substantially in the
form of Exhibit I-B attached hereto and shall include any amendments,
restatements, supplements, or other modifications thereto.


 


“Inventory”
means all “inventory,” as such term is defined in the Code, now owned or
hereafter acquired by the Company, wherever located, and in any event including
(as the context may reasonably permit) inventory, merchandise, goods and other
personal property that are held by or on behalf of the Company for sale or
lease or are furnished or are to be furnished under a contract of service, or
that constitute raw materials, work in process, finished goods, returned goods,
or materials or supplies of any kind, nature or description used or consumed or
to be used or consumed in the Company’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.


 


“Investment
Property” means all “investment property” as such term is defined in the
Code now owned or hereafter acquired by the Company, wherever located,
including (as the context may reasonably permit) (i) all securities,
whether certificated or uncertificated, including stocks, bonds, interests in
limited liability companies, partnership interests, treasuries, certificates of
deposit, and mutual fund shares; (ii) all securities entitlements of the
Company, including the rights of the Company to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of the
Company; (iv) all commodity contracts of the Company; and (v) all
commodity accounts held by the Company.


 


 “Letter-of-Credit Rights” means
“letter-of-credit rights” as such term is defined in the Code, now owned or
hereafter acquired by the Company, including (as the context may reasonably
permit) rights to payment or performance under a letter of credit, whether or
not the Company, as beneficiary, has demanded or is entitled to demand payment
or performance.


 


“License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by the Company.


 

















 


“Lien”
means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction).


 


“Patent
License” means rights under any written agreement now owned or hereafter
acquired by the Company granting any right with respect to any invention on
which a Patent is in existence.


 


“Patents”
means all of the following in which the Company now holds or hereafter acquires
any interest:  (a) all letters
patent of the United States or of any other country, all registrations and
recordings thereof, and all applications for letters patent of the United
States or of any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State, or any other country,
(b) all reissues, continuations, continuations-in-part or
extensions thereof, (c) all income, royalties, damages and payments now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past or future infringements thereof, (d)
the right to sue for past, present and future infringements thereof, and
(e) all rights corresponding thereto throughout the world.


 


“Permitted
Liens” means the following:


 


1.             Any liens arising under this
Security Agreement or any other Note Documents or as set forth on Schedule
4(a);


 


2.             Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided provision is made to the
reasonable satisfaction of Collateral Agent for the eventual payment thereof if
subsequently found payable;


 


3.             Liens (i) on equipment acquired or
held by the Company incurred in connection with the financing of the equipment,
or (ii) existing on equipment when acquired, if  the lien is confined to
the property and improvements and the proceeds of the equipment;


 


4.             Leases or subleases and licenses or
sublicenses granted in the ordinary course of the Company’s business not
interfering in any material respect with the business of the Company;


 


5.             Materialmen’s, mechanics’,
warehousemen’s, carriers’, repairmen’s, artisans’ landlords’ or other similar
liens arising in the ordinary course of business or by operation of law;


 


6.             Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by liens described in
clauses (1) through (5) above, but any extension, renewal or


 

















 


replacement lien must be limited to the property encumbered by the
existing lien and the principal amount of the indebtedness may not increase;


 


7.             Easements, reservations,
rights-of-law, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances affecting real property not having a material
adverse effect on the Company’s business or assets;


 


8.             Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default;


 


9.             Liens to secure payment of worker’s
compensation, unemployment insurance, old age pensions or other social security
obligations of the Company in the ordinary course of business; and


 


10.           Liens in favor of other financial
institutions arising in connection with the Company’s Deposit Accounts held at
such institutions, provided that the Purchasers have a perfected security
interest in the amounts held in such Deposit Accounts.


 


“Pledged
Stock” means, with respect to each direct and indirect Subsidiary of the
Company, all of the authorized outstanding shares of each class of capital
stock or other Equity Interests of such Subsidiary owned by the Company.  Pledged Stock shall include all shares,
securities, moneys or property representing a dividend on any of the aforesaid
capital stock and Equity Interests, or representing a distribution or return of
capital upon or in respect thereof, or resulting from a split-up, revision,
reclassification or other like change thereof or otherwise received in exchange
therefor, and any subscription, warrants, rights or options issued to the
holders of, otherwise in respect of, the aforesaid capital stock and Equity
Interests and without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Note Documents, in the
event of any consolidation or merger in which an issuer of the aforesaid capital
stock and Equity Interests is not the surviving corporation, all shares of each
class of the capital stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from such
consolidation or merger.


 


“Proceeds”
means “proceeds,” as such term is defined in the Code, including (as the
context may reasonably permit) (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Company from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to the Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), (c) any
claim of the Company against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by the Company against
third parties with respect to any litigation or dispute concerning any of the
Collateral including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral, (e) all amounts collected on, or distributed on
account of, other Collateral,


 

















 


including dividends, interest, distributions and Instruments with
respect to Investment Property, and (f) any and all other amounts, rights
to payment or other property acquired upon the sale, lease, license, exchange
or other disposition of Collateral and all rights arising out of Collateral.


 


 “Secured Obligations”
means all principal of all Notes outstanding from time to time, all interest
(including all interest that accrues after the commencement of any case or
proceeding in bankruptcy, insolvency or similar proceeding, whether or not
allowed or allowable in such case or proceeding) on such Notes and all other
amounts now or hereafter payable by the Company pursuant to any of the Note
Documents provided, however, that “Secured Obligations” shall not
include any obligations of the Company to any respective Purchaser as equity
holder of any of the Company’s capital stock.


 


“Secured Parties”
means the holders from time to time of the Secured Obligations.


 


“Security Agreement” or “Agreement” means this Security
Agreement, as the same may be amended, supplemented, restated or otherwise
modified from time to time.


 


“Software”
means all “software” as such term is defined in the Code, now owned or
hereafter acquired by the Company, other than software embedded in any category
of Goods, including all computer programs and all supporting information
provided in connection with a transaction related to any program.


 


 “Supporting Secured Obligations” means
all “supporting obligations” as such term is defined in the Code, including
letters of credit and guaranties issued in support of Accounts, Chattel Paper,
Documents, General Intangibles, Instruments, or Investment Property.


 


“Technology
Collateral Escrow Agent” means DSI Technology Escrow Services, Inc.


 


“Technology
Collateral Escrow Agreement” means the escrow agreement dated as of the
date hereof by and between the Company, the Technology Collateral Escrow Agent
and the Collateral Agent.


 


“Termination
Date” means the date on which all obligations of the Company to the
Purchasers or their assigns under the Notes, the Purchase Agreement, this
Security Agreement and each other Note Document have been indefeasibly
satisfied.


 


“Trademark
License” means rights under any written agreement now owned or hereafter
acquired by the Company granting any right to use any Trademark.


 


“Trademarks”
means all of the following now owned or hereafter existing or adopted or
acquired by the Company:  (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and General Intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof, (b) all reissues, extensions or renewals thereof, (c) all
rights corresponding thereto throughout the world (d) the


 

















 


right to recover for all past, present and future infringements thereof
and (e) all other rights of any kind whatsoever accruing thereunder or
pertaining thereto, together, in each case, with the product lines and goodwill
of the business connected with the use of, and symbolized by, any of the
foregoing.


 


The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Security Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause contained
in the Security Agreement or any such Annex, Exhibit or Schedule.


 


Wherever from
the context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter genders.  The words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation”; the word “or” is not exclusive; references to Persons include
their respective successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
the same and any successor statutes and regulations.  Whenever any provision in this Security Agreement refers to the
knowledge (or an analogous phrase) of the Company, such words are intended to
signify that the Company has actual knowledge or awareness of a particular fact
or circumstance or that the Company, if it had exercised reasonable diligence,
would have known or been aware of such fact or circumstance.


 

















 


EXHIBIT A


 


FORM OF


 


POWER OF ATTORNEY


 


This
Power of Attorney is executed and delivered by VCampus Corporation, a Delaware
corporation (the “Grantor”)
to Sherleigh Associates LLC
(hereinafter referred to as the “Attorney”),
as the Collateral Agent for the benefit of the Collateral Agent and the
Purchasers, under a Purchase Agreement and a Security Agreement, each dated as
of March __, 2004 and other related documents collectively (the “Note Documents”).  No person to whom this Power of Attorney is
presented, as authority for the Attorney to take any action or actions
contemplated hereby, shall be required to inquire into or seek confirmation
from the Grantor as to the authority of the Attorney to take any action
described below, or as to the existence of or fulfillment of any condition to
this Power of Attorney, which is intended to grant to the Attorney
unconditionally the authority to take and perform the actions contemplated
herein.  The power of attorney granted
hereby is coupled with an interest, and may not be revoked or canceled by the
Grantor without the Attorney’ s written consent.


 


The Grantor hereby
irrevocably constitutes and appoints the Attorney (and all officers, employees
or agents designated by the Attorney), with full power of substitution, as the
Grantor’s true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Grantor and in the name of the Grantor
or in its own name, from time to time in the Attorney’s discretion, without
notice to or assent by the Grantor, and at any time in the case of clause (h)
below and at any time an Event of Default (as defined in the Note Purchase
Agreement) has occurred and is continuing in the case of (a), (b), (c), (d),
(e), (f), (g), (i) and (j) below, to do the following: (a) change the mailing
address of the Grantor, open a post office box on behalf of the Grantor, open
mail for the Grantor, and ask, demand, collect, give acquittances and receipts
for, take possession of, endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, and notices in connection with any property of the Grantor
constituting Collateral; (b) effect any repairs to any asset of the Grantor, or
continue or obtain any insurance and pay all or any part of the premiums
therefor and costs thereof, and make, settle and adjust all claims under such
policies of insurance, and make all determinations and decisions with respect
to such policies; (c) pay or discharge any taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the Grantor or its
property constituting Collateral; (d) defend any suit, action or proceeding
brought against the Grantor if the Grantor does not defend such suit, action or
proceeding or if the Attorney believes that the Grantor is not pursuing such
defense in a manner that will maximize the recovery to the Attorney, and
settle, compromise or adjust any suit, action, or proceeding described above
and, in connection therewith, give such discharges or releases as the Attorney
may deem appropriate; (e) file or prosecute any claim, litigation, suit or
proceeding in any court of competent jurisdiction or before any arbitrator, or
take any other action otherwise deemed appropriate by the Attorney for the
purpose of collecting any and all such moneys due to the Grantor whenever
payable and to enforce any other right in respect of the Grantor’s property
constituting Collateral; (f) cause the certified public accountants then
engaged by the Grantor to prepare and deliver to the Attorney at any time and
from time to time, promptly upon the Attorney’s request, the following reports:
(1) a reconciliation of all accounts, (2) an aging of all


 

















 


accounts, (3) trial
balances, (4) test verifications of such accounts as the Attorney may request,
and (5) the results of each physical verification of inventory; (g) communicate
in its own name with any party to any contract with regard to the assignment of
the right, title and interest of such Grantor in and under the contracts and
other matters relating thereto; (h) file such financing statements with respect
to the aforesaid Security Agreement, with or without Grantor’s signature, or to
file a photocopy of such Security Agreement in substitution for a financing
statement, as the Collateral Agent may deem appropriate and to execute in the
Grantor’s name such financing statements and amendments thereto and
continuation statements which may require the Grantor’s signature; (i) execute,
in connection with any sale provided for in any Note Document, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral and to otherwise direct such sale or resale, all as though the
Attorney were the absolute owner of the property of the Grantor for all
purposes, and (j) at the Attorney’s option and the Grantor’s expense, at any
time or from time to time, all acts and other things that the Attorney
reasonably deems necessary to perfect, preserve, or realize upon the Grantor’s
property or assets and the Collateral Agent’s Liens thereon, all as fully and
effectively as the Grantor might do. 
The Grantor hereby ratifies, to the extent permitted by law, all that
said Attorney shall lawfully do or cause to be done by virtue hereof.


 


IN WITNESS WHEREOF, this
Power of Attorney is executed by the Grantor, and the Grantor has caused its
seal to be affixed pursuant to the authority of its board of directors this
          day of
                                     ,
2004.


 


	
   

  	
  VCampus Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


NOTARY
PUBLIC CERTIFICATE


 


On this           day of
                       ,
200  ,                                       
[name] who is personally known to me appeared before me in his/her capacity as
the
                                 [title]
of VCampus Corporation (“Grantor”) and executed on behalf of the Grantor the
Power of Attorney in favor of Sherleigh Associates LLC [Attorney] to which this Certificate is
attached.


 


 


	
   

  	
   

  
	
   

  	
  Notary Public

  



 

















 


EXHIBIT
I -A


 


FORM OF


NOTICE
OF SECURITY INTEREST


IN


PATENTS
AND TRADEMARKS


 


NOTICE
IS HEREBY GIVEN that VCampus Corporation, a Delaware corporation (the “Grantor”) with an office located at                                         
and Sherleigh Associates LLC
(the “Collateral Agent”),
with an office located at660 Madison Avenue, 15th Floor, New York,
New York 10021, on behalf of itself and certain other creditors of the Grantor
(collectively, the “Secured Parties”),
have entered into a Security Agreement dated as of March __, 2004 (the “Security Agreement”; terms defined in
the Security Agreement and not otherwise defined herein are used herein as
therein defined).


 


Pursuant
to the Security Agreement, the Grantor has conveyed, pledged, assigned and
transferred to the Collateral Agent, for the equal and ratable benefit of the
Secured Parties, and has granted to the Collateral Agent, for the equal and
ratable benefit of the Secured Parties, a security interest  the Trademarks and Trademark Licenses listed
in Schedule B hereto, together with the goodwill of the business
symbolized thereby, in each case to secure the prompt payment, performance and
observance of the Secured Obligations of such Grantor.


 


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VCampus Corporation

  
	
   

  	
   

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 

















 


EXHIBIT I -B


 


FORM OF


 


NOTICE OF SECURITY INTEREST


 


IN


 


COPYRIGHTS


 


NOTICE
IS HEREBY GIVEN that VCampus Corporation, a Delaware Corporation (the “Grantor”) with an office located at                                     and
Sherleigh Associates LLC,
as Collateral Agent (the “Collateral Agent”),
with an office located at 660 Madison Avenue, 15th Floor, New York,
New York 10021, on behalf of itself and certain other creditors of the Grantors
(collectively, the “Secured Parties”),
have entered into a Security Agreement dated as of March
       , 2004 (the “Security Agreement”; terms defined in
the Security Agreement and not otherwise defined herein are used herein as
therein defined).


 


Pursuant to the Security
Agreement, the Grantor has conveyed, pledged, assigned and transferred to the
Collateral Agent, for the equal and ratable benefit of the Secured Parties, and
has granted to the Collateral Agent, for the equal and ratable benefit of the
Secured Parties, a security interest in, the Copyrights and Copyright Licenses
listed on Schedule A hereto to secure the prompt payment, performance
and observance of the Secured Obligations of the Grantor.


 


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VCampus Corporation

  
	
   

  	
   

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: